Deciding to file for bankruptcy is a serious matter. However, it can be a beneficial solution for people and families struggling with debt. Declaring bankruptcy helps many individuals discharge their debts and start over. First, it is important to understand that not all bankruptcies are created equal. People considering bankruptcy should know the difference between Chapter 7 and Chapter 13.
What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcies?
Chapter 7 bankruptcy and Chapter 13 bankruptcy offer some similar benefits to people struggling with debt. However, each chapter poses specific requirements that an individual must meet. Further, they both offer specific benefits. Determining which chapter is right for you will depend on your specific situation.
One main difference between Chapter 7 and Chapter 13 is the manner in which your debts are repaid. Under Chapter 7, you would allow a trustee to sell some of your property to pay back your creditors. Typically, this option allows a debtor to wipe out most kinds of debt.
Chapter 13 allows you to design a repayment plan that will, upon approval, pay off your creditors over time.
Who Should File Chapter 7 Bankruptcy?
Eligibility for Chapter 7 depends on monthly income and disposable income. People who have a monthly income over the median income for a similarly sized household in their state are not eligible. Further, if your disposable income is large enough to pay back your creditors over time, you are ineligible.
One benefit of filing under Chapter 7 includes an “automatic stay” which stops debt collectors from pressing you for payments. Chapter 7 also allows you to discharge most kinds of debts. Additionally, while you will lose some assets in the process, each state has a list of asset exemptions you can choose from.
Who Should File Chapter 13 Bankruptcy?
Eligibility for Chapter 13 requires that the individual’s debts are not too high. At the same time, you must prove employment and have the means to make payments over time with your disposable income. You must also be up to date on your tax filings.
People who choose to file Chapter 13 sometimes do so because they are not eligible for Chapter 7. Others do so to keep valuable property by making payments over time. Retaining nonexempt assets that otherwise would be seized under Chapter 7 is a big motivating factor for choosing this option. You may also find Chapter 13 beneficial because it allows you to make up for missed car or mortgage payments.
Should I File Chapter 7 or Chapter 13 Bankruptcy?
Understanding the difference between Chapter 7 and Chapter 13 is the first step in determining which is right for you. First, your income level and ability to restructure your debts can help you determine chapter eligibility. Then, choosing the right chapter will depend on your goals.
Contacting our Monmouth County bankruptcy lawyers can help you get a better idea of where you stand. We can determine your bankruptcy options and whether alternatives to bankruptcy are available to you.
Our New Jersey Bankruptcy Attorneys Are Here to Help
Filing for bankruptcy is a difficult, yet often rewarding decision. However, you should speak to an attorney before making this decision. Our Monmouth County bankruptcy lawyers can help you decide which chapter is right for you. Then, we can help you every step of the bankruptcy process. You can give us a call at (732) 358-2028 to schedule a free consultation.